A Period of Adjustment

Oops! That large hissing sound is the gaming balloon that experienced been growing above the several years, gradually losing air. But, it has not been a tide that lowered all ships nevertheless, as some emerging and increasing gaming jurisdictions showed sturdy growth in 2008.

Overall, the commercial and racetrack on line casino sectors (excluding Indian gaming), seasoned a three.5 % decrease in gaming revenues for 2008, making a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a acquire of practically $one billion in 2008, therefore bringing the Professional sector marketplace drop to $1.8 billion, or 6.7 per cent. Nevada was the greatest loser in 2008, dropping practically $1.three billion, much more than half of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most component, casino operators have been caught fairly flat-footed by the extent of the 2008 earnings downturn, as it was not right up until the 3rd and fourth quarters when it truly nosedived. Using the crest of 12 months over year market development throughout the place and the availability of enough credit score and equity resources, new design and growth proliferated in current years. These days, faced with the realities of declining, or at greatest stagnant desire, many of these tasks are now considered over-leveraged and/or over-sized. As a consequence numerous gaming firms are attempting to renegotiate their personal debt – manufactured more tough by lower valuations – while also paring down operational expenses. The latter has become a extremely problematic conundrum when working with the competitors, specially in those jurisdictions that are now vying for market shares with new emerging on line casino initiatives in neighboring locations. A matter we discuss a lot more completely in the State by Point out examination part of this publication.

As a end result of these situations the gaming market landscape is now strewn with impending fatalities. Among the more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the list grows each and every 7 days.

“How long will these financial problems persist, and are we at the bottom nevertheless?” are concerns no 1 appears to be answering nevertheless. What is distinct even so is that most gaming jurisdictions will have to understand how to offer with a smaller pie.

Be aware:
This evaluation consists of only gaming revenues of licensed casinos and pari-mutuel shops that provide on line casino games, and not Indian gaming operations, card rooms, or little non-casino kind slot areas. The total post, including profits tables is accessible on our net web page.

Enter/Output Design

A important aspect that looks to have arisen from the ashes of this existing development is that several casino initiatives have been just too massive to assistance them selves. The enter, in terms of investment decision pounds, was not proportional to the output, in conditions of internet earnings right after credit card debt provider, compared to formerly attained outcomes. More and/or even bigger is not usually greater. Looking at the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the growth of much more complete amenities in numerous other jurisdictions. The flaw in this strategy however is that the expenses related with widening industry penetration and occasioned-use, are drastically larger than these incurred to appeal to the base marketplace.

As daytripper marketplaces become a lot more competitive, on line casino venues will have to depend a lot more and a lot more on their in-property resort patrons, and dimension their qualities (and expectations) accordingly. Whilst Steve Wynn commenced a significant pattern in creating up-market place mega-destinations, there basically was not sufficient demand on the Strip to warrant the many other similar initiatives that followed that aimed at the very same market.

The trick is to strike a satisfied medium in undertaking configurations which of training course need much less of a ‘seat-of-pants’ technique, and a single that is more researched. A shameless plug for growth consultants like ourselves.

Other Gaming Activities

Although there are no published detailed data of American Indian gaming revenues, anecdotal evidence appears to propose that this section has been as tough strike as the Business sector. The two Connecticut Indian gaming installations report slot revenue of $1.6 billion in 2008, symbolizing a fall of about 7 per cent, or nearly $114 million, much more than doubling the three.five percent drop from the yr prior to. This industry is evidently still reeling from the ripple-effect of a on line casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Department of Gaming reports that contributions based mostly on a gaming income formulation from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 compared to the previous year reducing .8 per cent in the initial quarter, 7.5 percent in the 2nd quarter, 9.5 % in the 3rd quarter, and 16.one p.c in the fourth quarter.

Some SEC reporting Indian gaming houses report comparable decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, reviews that even though calendar yr 2008 confirmed an virtually two p.c growth charge in gaming revenues, there was an eight.seven per cent decline in the 3rd quarter and an practically ten % drop in the fourth quarter of 2008, in contrast with 2007. Gaming income developments at close by Niagara Falls, Ontario ended up down one.five% in 2008 compared with 2007.

It truly is been a combined-bag for condition lotteries throughout the region. The North American Affiliation of Condition & Provincial Lotteries studies that U.S. lotteries created a complete of $sixty.six billion in revenue in fiscal 2008, up about three p.c from the previous 12 months however some jurisdictions documented decreases, most notably California, which confirmed an eight % drop. Inasmuch as some of these states are on a variety of fiscal year ends, it would appear that the info does not reflect the effect of 3rd and/or fourth quarter final results.

According to info supplied by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 percent to $thirteen.7 billion in 2008, versus $fourteen.seven billion in 2007.

Planned & Proposed New Expansions

As previously famous, it has been new gaming jurisdictions that have spawned much of the progress in once-a-year on line casino/racino revenues above the several years, and their effect is apt to proceed into the near foreseeable future.

Florida
Miami Dade voters accepted a ballot situation that permits each and every of three pari-mutuels to have a on line casino facility of up to two,000 slot devices. The Flagler Canine Track and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has yet to announced its programs. There are several other proposals becoming considered that would more increase on line casino advancement throughout the point out.

Illinois
The condition last but not least acquired about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a one,200+ sport on line casino positioned in Des Plaines just east of O’Hare. The new facility is not likely to open up right up until 2010. There has also been some discussion about permitting an enhance in per location gaming positions and slots at racetracks, despite the fact that neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery program that enables for the advancement of 4 casino gaming zones and slots at present horse and pet tracks seems mired, as only one facility is presently beneath construction, even though a few other proposals have been rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is found so near to the condition line that its parking whole lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table games, along with a 2nd section due to open in 2011 with 875 slots and 20 desk video games. The state has prolonged the application procedure for the other a few zones till April, 2009.

Kentucky
There is nevertheless a great deal of ‘jockeying’ heading on, but the prospect of as several as 8 slot parlors and racinos appears to be back again on the front-burner, but most likely not resolved for the duration of the existing legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most current getting the 390 room M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Difficult Rock and new resorts consist of two elements of the Town Heart project, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino development projects in Baton Rouge and Lake Charles, although delayed, are noted to even now be on-track for opening this year and/or early 2010.

Maine
There is a monthly bill underneath thought that could more than double Penn National’s slot equipment to 3,000, as properly as a proposal that would remove the restriction that slots be positioned inside of five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing local citizens to enable slots, might be thinking about moving to a more hospitable city.

Maryland
A referendum was approved in November, 2008 that makes it possible for for the development of five casinos with a overall of 15,000 slots, and now the bidding war is afoot though it is not as intensive as the condition experienced anticipated.

Mississippi
Grand Soleil On line casino Vacation resort in Natchez had been slated to open in 2008, but has operate into a variety of funding issues and even though the lodge part is open, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back relatively, is still on monitor to open this 12 months.

New England
Massachusetts, a sleeping-big in conditions of industry prospective, is even now maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but cannot appear to muster the political support. A current review finished by Dartmouth College estimates that Massachusetts resident put in much more than $920 million final yr at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an alternative to produce casinos, even so the subject is likely to be revisited, particularly if Massachusetts decides to go ahead. There are also attempts in Maine to reconsider its possibilities.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by just lately agreeing to continue augmenting purses with an additional tax. The governor however, has appointed a new panel to research the state’s sagging racing software which ironically, can only be preserved by enabling the tracks to have slot devices especially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it looked as if Aqueduct’s 4,five hundred VLT facility would finally be created, the winning bidder indicated an incapability to make the needed $370 million charge, citing the recent lending local weather, and throwing the undertaking again into the lap of the governor. Although the market demand from customers in the spot could be deemed really powerful, the prospect of further competitiveness from nearby Belmont could have an influence on Aqueduct’s underlining economic feasibility, specially considering that slightly significantly less than thirty% of the web win is retained by the operator.

Plans to relocate Monticello Raceway into a vacation resort sophisticated are becoming reconsidered possibly owing to both the probable opening of at the very least 1 or probably two racino operations in the NY metro region, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

Ohio
Nevertheless one more gaming proposal is currently being put forth in Ohio, after very last year’s model was turned down by the voters. This prepare phone calls for one on line casino every single in the state’s premier towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a least investment decision essential of $250 million, as well as an first licensing payment of $fifty million, and a 33 p.c tax on gaming profits.

Pennsylvania
The Sands in Bethlehem is thanks to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is expected to be operational in August, ’09 even though Philadelphia’s two slot facilities still wallow in a political mire, but are expected to begin construction this 12 months.

South Dakota
The Lodge at Deadwood is slated to open up in the Tumble of 2009, and consist of three hundred video games, 140 rooms and a wide variety of facilities.

Texas
Legislators are proposing a voter referendum that would amend the point out constitution to let on line casino gambling in designated areas, as effectively as enable gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. Condition federal government has proffered the notion of allowing the vacation resort to supply on line casino video games, but this hard work is in too early a phase to have any traction 1 way or yet another.

Indian Gaming
A latest Supreme Court ruling that restricts the taking of lands into have faith in on behalf of federally identified American Indian tribes has further stymied some new Class III gaming initiatives throughout the nation. In addition, there had been eleven Indian casino assignments turned down by the DOI final year simply because of its new rule that casinos must be in close proximity to sufficient to a reservation that tribal members can function at them. It has been suggested that the new Obama administration may possibly be much more sympathetic to the advancement of Indian gaming initiatives, but this concern has yet to be dealt with.

Meanwhile, there are other Class III tasks in the a variety of phases of advancement. The Seneca casino task in Buffalo, NY, while running a small temporary facility, has delayed an already below development long term facility right up until the market place rebounds. They have also expressed an desire in establishing a casino in the Catskills. The point out gaming compact with Seminoles in Florida is being challenged, and could influence their programs for larger tasks. There are new Indian gaming tasks set to open up in Michigan and Oklahoma this yr, and others are in the planning stage. Texas may possibly let the reopening of Indian gaming services and allow other location and there are programs afoot by the Navajos in Arizona to construct extra casinos. California is poised to open up two to 3 new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Complete gaming earnings in Atlantic Metropolis has declined seven.six %, from $four.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the city is locating alone in an intense comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast had been situated in Atlantic Metropolis, where it looked as if it may possibly truly even eclipse the Las Vegas Strip’s yearly gaming revenues.

Gradually even so its marketplace share was being encroached on, initial by the improvement of a massive Course III gaming procedure in Connecticut, and then yet another slots functions in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with the planned opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and sooner or later two functions in Philadelphia, the noose is tightening all around Atlantic City’s foreseeable future prospective customers. It really is reliance on day-trippers lulled it into a false perception of security, and it now finds alone possessing to redefine its mission statement to “spot resort.”

The only issue with this approach even so is that it is ill-outfitted to pull it off. For all intents and needs, Atlantic Metropolis is underneath-roomed and/or more than-gamed. There is basically casinobauble.com -tripper marketplace to go close to, and their successful investing spot is tightening, as the peripheral populations northward now/will have much more ready access to a widened source in New York (Yonkers, and quickly at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean access, the city’s only true aggressive advantages are its resort potential and the availability of desk games, even though the latter is most likely to eventuate in Pennsylvania, and perhaps Delaware. In order to adequately contend as a vacation spot resort the town demands to produce further guest rooms and not automatically gaming capacity. By comparison, the Las Vegas Strip properties – correct gaming destinations, in that they do not have considerably of a working day-vacation marketplace, other than for the ‘locals’ – have an average of .87 gaming positions for each guest space whilst Atlantic City’s typical is 2.74 positions for every visitor area.

It is not a coincidence that Atlantic City’s two biggest accommodations, the Borgata and Harrah’s Marina, equally of which additional new rooms in 2008, ended up the least impacted by the newest downturn. The Borgata knowledgeable a gaming profits drop of one.six percent, even though Harrah’s Marina described a 4.nine p.c enhance when compared to 2007. Furthermore, the hardest strike venues, specifically the AC Hilton, Resorts and the Trump Marina, also have the smallest quantity of rooms. In the meantime some of the venues are teetering on viability, including the the Trump homes and Resorts with the hoped for sale of the Tropicana has been more delayed, and shedding valuation.

With a steady rise in gaming revenues by way of 2006, the metropolis seemed primary for more improvement, which precipitated arranging for 4 new resort projects, every of which have now been indefinitely delayed. Revel Amusement Group’s $two.5 billion undertaking continues to be an iron skeleton, Pinnacle Entertainment has introduced it might seek out to promote its razed Sands internet site, MGM Mirage has shelved its on line casino programs, and Penn Nationwide appears to have stopped its pursuit of the Bader Discipline airport web site.